3 ms·
2008 didn't happen because of a lack of regulation, it happened because of absolutely awful regulation. You don't need more regulation, you need smarter regula
by cderwin 10y ago
2008 didn't happen because of a lack of regulation, it happened because of absolutely awful regulation. You don't need more regulation, you need smarter regulation. It is absolutely absurd that the federal government subsidized loans to (insolvent) poor people that they can't pay back -- resulting in subprime the mortgages that caused the crisis. Now, in no way am I saying banks had no hand in it; that's just untrue. But it certainly was not the one-sided affair leftist revisionists wish it were.
- 0xcde4c3db 10y agoLast time I read up on this, I was led to believe that the regulations were only a minor factor, and the main thing driving the subprime explosion was demand in the investment market for misleadingly-rated mortgage-backed securities. My understanding of the details is almost nonexistent, but I gather that there was some kind of statistical wizardry that let lenders load up a bunch of crappy mortgages into a package that was, in aggregate, supposedly an extremely safe investment with a very attractive return. These securities became the primary product, with the mortgages themselves being the raw material. The market demanded that production increase, so the lenders did the finance equivalent of drilling for tar sands oil. At this point there was no need for the government to mandate subprime mortgages. Lenders weren't just grudgingly implementing policy, they were enthusiastic, shouting from the rooftops for people to apply for mortgages even if they thought they wouldn't qualify. I clearly remember Countrywide's motto: "No one can do what Countrywide can". I guess it turned out that Countrywide couldn't do it either.